So far, this week's US economic data have been mixed. March New New Home Sales and Durable Goods Orders were disappointing, posting declines and coming in below consensus. But, March Pending Home Sales sped up and the March Trade Deficit narrowed.
New Residential and Manufacturing Demand look to be in a flat ranges since November 2015, with March prints coming in at the low end of these ranges (see table below).
The smaller trade deficit resulted from a large drop in imports, meaning that some of the weakness in US domestic demand is hurting foreign economies rather than that of the US.
The flattening of demand in two major sectors of the US economy does not bode well for the GDP outlook. Consensus for Q1 Real GDP (due tomorrow) is 0.6% (q/q, saar) -- equal to the Atlanta Fed GDP Model estimate (which was raised from 0.3% after today's release of the advance March Trade Deficit). And, Q2 GDP Growth may not be much better. The NY Fed GDP Model's early prediction is +1.2%. Both quarters would be slower than the 1.4% in Q415.
I would not be surprised if this sluggish growth picture catches up to April Payrolls, pulling them below 200k. April Payrolls are due May 6.
This anemic growth backdrop should keep the Fed on hold at least until after the November elections. The backdrop is a positive for Treasuries and a caution for stocks.
Durable Goods Orders
New Home Sales Ex Transportation Core
Oct15 715k Units $156.8 Bn $69.6 Bn
Nov 727 156.0 68.9
Dec 732 154.9 66.5
Q4 Avg 725 155.9 68.3
Jan16 728 157.0 68.7
Feb 736 155.1 66.9
Mar 724 154.7 66.9
Q1Avg 729 155.6 67.5
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